ABA, the American Bankers Insurance Association and 52 state bankers associations today wrote to Treasury Secretary Jack Lew urging him to promote Treasury-led efforts to clarify when and how mandatory flood insurance policies are purchased.
Flood insurance compliance has become more difficult in the two years since the Biggert-Waters flood insurance reform law and its follow-up, the Homeowner Flood Insurance Affordability Act, were passed. Since the Federal Emergency Management Agency is now tasked with much of the implementation, bankers have been less able to receive clear and quick answers on compliance questions from their regulators.
“Currently, there is no effort by FEMA to respond to inquiries regarding the interpretation and the application of many of these changes,” ABA said. “The key importance of responding to these bank inquiries can be understood when it is recognized that borrowers typically hear for the first time about their obligation to purchase flood insurance from their lender.”
ABA added that “[t]he straightforward enforcement role Congress assigned to the banking industry — ensuring that a bank does not ‘make, increase, extend or renew any designated loan unless the building or mobile home securing the property is covered by flood insurance for the term of the loan’ — has devolved into an increasingly complex and inefficient compliance exercise.” With the issues so complex, ABA called on Treasury’s Federal Insurance Office to convene banks, regulators, FEMA and insurers to address ongoing implementation and communication challenges. For more information, contact ABA’s Anjali Phillips.